The More I Err, the Less I Pay: Effect of Firm Recall Experience, Firm Type, and Recall Severity on Remedy to Consumers

Purpose: This study aims to investigate the effects of firm characteristics and crisis characteristics on remedies offered to consumers by firms in the event of a product recall crisis. Design/methodology/approach: Published data on 868 product recalls in the US toy industry from 1988 to 2011 have been used to investigate the effects of firm experience in product recalls, type of firm (company versus intermediary) and product recall severity in predicting remedies offered to consumers in the event of a product recall. Findings: The findings show that firm recall experience, firm type and recall severity are negatively associated with recall remedies offered. Specifically, firms offer lower remedies if they have higher recall experience, if they are upstream firms in the supply chain (farther from consumers) and if the recall is more severe. Research limitations/implications: This study focuses on the toy industry and does not consider product complexity, firm reputation and the role of external regulatory agencies in the prediction of remedies offered by firms. Future research may extend this study to include the above factors. Practical implications: Offering a high remedy to consumers of a recalled product may be a responsible decision by a firm, but it may also attract shareholder wrath. The study has implications for managing multiple goals in product recall crisis management. Originality/value: Studies focused on issues of interest to consumers during a recall crisis, such as swift recalls and appropriate remedies, are limited. This study contributes to the understanding of the antecedents of recall remedies